4.0 PLUG AND ABANDONMENT

Shenandoah-1A, NT, Australia – Well Completion Report

4.0 PLUG AND ABANDONMENT

The Shenandoah-1A was plugged and abandoned (P&A) on 7 November, 2011. Each tested interval is isolated with a cast iron bridge plug (CIBP). On top of the shallowest CIBP a 15m long cement plug was set, which was followed by another 15m long surface cement plug (Figure 4.A). Correspondence between Falcon Oil and Gas Australia and the Department of Resources, NT regarding P&A request and approval is included in Appendix II of this report.

Figure 4.A Plug and Abandonment schematic of Shenandoah 1A

Falcon Oil and Gas Australia Pty Ltd - Shenandoah #1 Wellbore Diagram revised M.Hoover 06.nov.11

PLUG AND ABANDONConductor:� 20" OD, 94 lb/ft, H-40, BTC

Pre-Set @ 20 m

84 m 17-1/2" HoleTindall LS 20 m

265 mAntrim Volcanics

Surface Casing: 13-3/8" OD, 54.5 lb/ft, K-55, BTC347 m 312.11 mKB Shoe set @ 312.11 mKB

Bukalara 12-1/4" Hole 405 mU. Hayfield

856 mJamison

938 mKyalla

KOP - N/A

BUR = 0 deg/30m

3.5 deg max inclination

Intermediate Casing: 9-5/8" OD, 47 lb/ft, K-55, BTC1553 m Shoe set @ 1553 m

82o C, 180o F CIBPCIBP

1631 mMDRT Performance Properties1649 mMDRT 4-1/2" 15.1# P-110 Vam Top

ID: 3.826"; Drift: 3.700"1715m CIBP Internal Yield: 14,420 psi

Moroak 1728 mMDRT Collapse: 14,340 psi1780 mMDRT 1.1 safety factor applied to

burst, collapse, and tension8-1/2" Hole

CIBP1833 mMDRT1910 mMDRT

CIBP

2200 mVelkerri

2481 mMDRT2498.5 mMDRT

CIBP2529 mMDRT2548 mMDRT

Float Collar set @ 2687m MDRT Casing Total Depth TD 2714 m Production Casing: 4-1/2" OD, 15.1 lb/ft, P-110, VAM Top2701m MDRT BHST 114 °C, 237 °F Shoe set @ 2701m MDRT

2950 m

15 m

C

EM

EN

T

1610 m

15 m

C

EM

EN

T

Note: Rotary Table to Ground Level was 4.2m

2522 m

1952 m

All Bridge Plugs were pressure tested with 9800 psig1815 m

1660 m

1575 m

51

  Shenandoah‐1A, NT, Australia – Well Completion Report   

5.0 ENVIRONMENTAL Falcon Oil and Gas is sensitive to the value of the natural environment and is committed to minimizing the effects its operations have on the surrounding environment. Well site footprints are limited in size and restored to limit the impact of the natural process to establish the natural conditions. The protection of ground water aquifers from any contamination caused by the drilling, completion, stimulation or production activities is of paramount concern. AECOM Australia Pty Ltd, a world leading environmental consultancy was chosen to develop and monitor the re-entry drilling and testing of the Shenandoah-1A. The AECOM, Drilling Environmental Plan 2011-2012 (Appendix I) is included in this report. AECOM was also chosen to monitor water ground water quality around the Shenandoah-1A operations. The following is the AECOM Groundwater Sampling Method.  

52

  Shenandoah‐1A, NT, Australia – Well Completion Report   

53

  Shenandoah‐1A, NT, Australia – Well Completion Report   

Documentation of the various AECOM periodic reports and certificates of analysis are included in Appendix XIII of this report. To date there are no indications that the Shenandoah-1A drilling, re-entry, stimulation or water reinjection has impacted the ground water in any way.

54

Shenandoah-1A, NT, Australia – Well Completion Report

6.0 CONCLUSIONS

The drilling and testing of the Shenandoah-1A has advanced the understanding of the geologic model of the Beetaloo Basin and demonstrated the viability of the Proterozoic Kyalla and Velkerri petroleum systems. The Shenandoah-1 well was placed to penetrate the formations at the deepest location within the center of the Beetaloo Basin and as a twin to the Pacific Oil and Gas, Balmain-1 well drilled in 1992. The Balmain-1 well recorded oil fluorescence shows over the Hayfield Sandstone and Upper Kyalla Formations with TD @ 1050 m. The Shenandoah-1 also recorded oil shows over the Hayfield Sandstone and Upper Kyalla Formations and was drilled deeper into the basin where casing was set at 1553 m. Mud gas increased substantially in the Shenandoah-1 while drilling through the Mid Kyalla Sandstone @ 1463 m and continued into the Lower Kyalla to TD. The Pacific Oil and Gas well, Jamison-1, drilled in 1990-1991, was located ~20 km to the south east of Shenandoah-1. It also recorded oil shows similar to the Shenandoah-1 and Balmain-1 wells over the Hayfield and Upper Kyalla and was drilled deeper through the Lower Kyalla and reached TD @ 1765 m within the Upper Moroak Sandstone. Jamison-1 mud gas shows were recorded continuously throughout the Kyalla and increased markedly over the Lower Kyalla from 1560-1670 m. The Shenandoah-1A commenced drilling from 1553 m in August 2009 reaching a total depth of 2714 m in October 2009. Similar to the Jamison-,1 well, mud gas shows on the Shenandoah-1A were immediately recorded while drilling into the Lower Kyalla with a significant increase from 1615-1675 m where total gas reached ~ 11%. Shenandoah-1A mud gas decreased in the Upper Moroak Sandstone with a substantial drop @ 1806 m. Mud gas remained relatively low throughout the Moroak Formation and Upper Velkerri with an increase recorded over the Middle Velkerri section below 2410 m and a substantial increase over the Middle Velkerri Lower B from 2518-2558 m. Figure 6.A is a plot of the Shenandoah-1A mud gas dryness ratio vs. depth including gas dryness ratio from the isotube data collected during the drilling of the well. There is good agreement between the mud gas and drilling isotube ratios as well as the gas ratios collected during the Velkerri and Lower Kyalla well tests. The gas dryness ratios indicate that the Lower Kyalla gas has more heavy components than the Middle Velkerri gas. These data support the thermal maturity interpretation that for depths greater than ~1700 m in the Beetaloo Basin, dry gas is the prevalent hydrocarbon fluid type. Source rocks shallower than ~1700 m are most likely in the oil window of thermal maturity.

55

Shenandoah-1A, NT, Australia – Well Completion Report

Figure 6.A Shenandoah-1A: Mud Gas Dryness Ratio

The penetration of the Velkerri formation in the Shenandoah-1A is the first evidence of the distribution of the Velkerri Formation southward into the Beetaloo Basin. Prior to the drilling of the Shenandoah-1A, the Velkerri Formation was documented in the Pacific Oil and Gas wells, Altree-2, Walton-2 and McManus-1 wells ~100 km to the north. Cores over the Middle Velkerri from the three Pacific Oil and Gas wells are described as “Bleeding Oil and Gas”. Figure 6.B shows the correlation of the Velkerri that was achievable by recognizing the “Twin Peaks” marker bed present in the Altree-2 and Shenandoah-1A wells. At the Altree-2 location the Middle Velkerri A, B and C are organic rich source rocks with TOC up to 6-8%. Thermal maturity estimations place the relatively shallow Middle Velkerri source rocks in the oil window at the Altree-2 location. The Middle Velkerri C source rock identified in the Altree-2 well is interpreted as not present at the Shenandoah-1A location.

56

Shenandoah-1A, NT, Australia – Well Completion Report

At the Shenandoah-1A location the Middle Velkerri A and B zones contain low porosity gas sands with little if any organic matter identified. The Middle Velkerri Lower B (Stage 1 well test) has 2% TOC and is the most likely the source for gas tested in the Middle Velkerri B (Stage 2 well test). It is not surprising that the lithofacies of the Velkerri formation varies over the 100 km distance between the Altree-2 and Shenandoah-1A. It is also recognized that the correlations from these two wells may be changed with additional drilling within the Beetaloo Basin.

Figure 6.B Stratigraphic correlation: Altree-2 to Shenandoah-1A

57

Shenandoah-1A, NT, Australia – Well Completion Report

The Shenandoah-1A, Stage 3 and 4 well tests in the Moroak Sandstone were in intervals that have very low porosity and permeability. There are other intervals within the Moroak Formation identified from log analysis that have higher porosity and, most likely, higher permeability. These intervals were not tested due to the lack of mud log shows and the log analysis indication that the more porous sands were water saturated. The Moroak Formation is a good candidate for conventional hydrocarbon accumulations due to the viability of the Lower Kyalla and Velkerri petroleum systems.

The Shenandoah-1A, stimulation and short well tests (Stage 1, 2 &5) over the Middle Velkerri and Lower Kyalla demonstrated that these formations can be hydraulically fractured, the reservoirs are over pressured, all three reservoirs contain producible hydrocarbons and may have enough permeability to be candidates for horizontal well tests. Given successful horizontal long term tests, the pervasive regional extent of both the Middle Velkerri and Lower Kyalla in the Beetaloo Basin will offer excellent targets for future development.

58